Parsons v. Detroit & Canada Tunnel Co.

Decision Date31 July 1936
Docket NumberNo. 5356.,5356.
Citation15 F. Supp. 986
PartiesPARSONS et al. v. DETROIT & CANADA TUNNEL CO. et al.
CourtU.S. District Court — Western District of Michigan

COPYRIGHT MATERIAL OMITTED

Sherwin A. Hill and Charles E. Lewis, both of Detroit, Mich., for petitioner.

Raymond J. Kelly and Walter Barlow, both of Detroit, Mich., for City of Detroit, and Albert E. Cobo, treasurer.

MOINET, District Judge.

On petitions filed herein the receiver of the defendant company asserts the illegality of ad valorem real property tax assessments against the defendant's property for the years 1932, 1933, and 1934 because, principally, of erroneous methods of valuation, gross excessiveness, and unlawful discrimination, in violation of the due process and equality clauses of the Fourteenth Amendment to the Federal Constitution. The court is asked to determine the amount justly due on account of said taxes and to restrain the collection of such portion of the taxes levied for said years as shall be found to be in excess of the amounts found herein to be justly owing therefor.

The defendant, Detroit & Canada Tunnel Company, was incorporated on August 25, 1927, under the General Corporation Laws of Michigan, for the general purpose of building, owning, and operating (in conjunction with its wholly owned subsidiary, the Detroit & Windsor Subway Company, a Canadian corporation), a vehicular tunnel or subway underneath the Detroit river between Detroit, Mich., and Windsor, Ontario. On April 30, 1932, the petitioner was appointed as receiver for the defendant company in this creditors' equity receivership suit. On March 7, 1935, possession and control of the defendant's property was placed by this court in the hands of the petitioner as trustee in reorganization proceedings under section 77B of the Federal Bankruptcy Act (11 U.S.C.A. § 207).

At the time of the appointment of the petitioner as receiver of the defendant company on April 30, 1932, the protest of the tunnel company against the 1932 real property tax assessment was pending with the board of review. The receiver, after exhausting the remedies by proper appeal before the board of review and state tax commission, filed petition herein for the purposes aforesaid. Similar procedure was followed by the receiver with reference to tax assessments for the years 1933 and 1934. An order was entered herein permitting the trustee in the reorganization proceedings to intervene in these proceedings as a co-petitioner with the receiver. In pursuance of stipulation and agreements of record between the parties, the petitions and answers pertaining to the taxes for the three years 1932, 1933, and 1934 have been consolidated for hearing and determination herein. Extensive proofs, briefs, and arguments were presented to a special master, and his comprehensive report and supplemental report have been approved and adopted by the court; all exceptions thereto being overruled after consideration of briefs and arguments of counsel.

It is the claim of the petitioner that the business and property of the defendant company is in the nature of a single purpose, public utility, so called; that as to such property the capitalized income method of ascertaining true cash value, either alone or in combination with the stock and bond method, so called, is a fundamentally essential method of valuation under the circumstances here involved; that the assessing authorities, in valuing the property for the three years in question, failed and refused to give any consideration or weight to the capitalized income method; that they arrived at their valuations solely upon the basis of original or reproduction cost, less depreciation; that in so doing they adopted a fundamentally erroneous principle or method; that the resulting valuations were more than 400 per cent. greater than the level of property valuation generally, and were so grossly excessive and the persistent and systematic action of the assessors so arbitrary as to be the equivalent of fraud; and that under these circumstances the assessments were in violation of the Fourteenth Amendment.

It is also claimed by the petitioner that the underground portion of the tunnel structure, which is built in city-owned property under a franchise granted to the tunnel company for that purpose, should have been assessed as personal property under the provisions of sections 3396 (as amended by Act No. 94 of 1931) and 3402 of the Compiled Laws of Michigan of 1929, whereas the assessors included it in the valuation of the real estate owned by and assessed to the defendant company; that as personal property this portion of the tunnel would have been subject to the superior lien of the general mortgage of the company, and, under certain circumstances, the tax claim against this portion of the tunnel would have relegated to the status of a general claim.

The respondent taxing authorities admit in their answers (and in an agreed statement of facts) that they arrived at the valuation of the property in question in the manner complained of by the petitioner, but it is their contention that under Michigan statutes the action of the administrative officers in arriving at true cash value is final and is not subject to review by the courts under any circumstances; that the property in question is not a public utility and that the capitalization of net earnings method of valuation is therefore not applicable; that these proceedings are barred by the provisions of Michigan and federal statutes which provide that no injunction shall issue to stay proceedings for the assessment or collection of taxes, and by a section of the franchise given to the tunnel company by the city of Detroit in which it was agreed that nothing contained therein should be construed as a waiver of the right of the city of Detroit to impose taxes upon the property of the tunnel company. They deny that any portion of the tunnel is taxable as personal property.

The pertinent facts are not in controversy, and have, to considerable extent, been agreed upon by stipulation or conceded by admissions in the pleadings.

The tunnel property consists of a subsurface tunnel tube constructed of steel and masonry passing underneath the Detroit river and adjacent land and inclosing a two-way road which emerges on the Detroit and Windsor sides of the river upon terminal properties which accommodate specially designed ventilation buildings, customs and immigration buildings, toll booths, immigration offices and inspection rooms, and other incidental facilities in connection therewith.

Construction of the tunnel was begun in 1928. It was completed and opened for traffic on November 3, 1930, and has been operated continuously ever since by the defendant company until April 30, 1932, and thereafter by petitioner as receiver and trustee.

The sole use to which this tunnel property can be and has been devoted is as a highway through which vehicles may be driven between Detroit and Windsor. Its value varies with, and depends entirely upon, the profitableness of its use. It cannot be now used, and cannot be changed so as to be capable of use, for any other purpose having any possible connection with value, whether a going concern value, scrap value, sentimental value, æsthetic value, or other value, either present or future.

It is conceded by the respondents (stipulated facts, Exhibit 16, par. 14; 1934 petition, par. 13; city answer of 1934, par. 5; county answer of 1934, par. V) that the tunnel properties in question are so designed and of such a character as to be usable for a single purpose only.

The facts relating to the "public utility character" of the tunnel properties are as follows: (See stipulated facts, Exhibit 16, pars. 1, 2, 3, 4, 5, 6, and 7, and the pleadings, 1934 petition, par. 13; city answer 1934, par. 5, and 1934 Wayne county answer, par. V.)

The tunnel company was originally organized (under the purposes stated in its articles of association) to conduct a transportation business by means of a vehicular tunnel underneath the Detroit river between Detroit and Windsor. The General Corporation Act of Michigan, so called (Act No. 84, Public Acts 1921), under which the defendant tunnel company was incorporated, gave to highway tunnel companies the power to condemn real estate for right of way purposes. Railroad companies and railroad tunnel companies (as distinguished from highway tunnel companies) and certain other utilities were required to incorporate under special acts. In acting upon the application of the company for permission to sell securities, the Michigan Public Securities Commission, by formal order, found that the purpose of the company was to conduct a general transportation business as a common carrier of passengers and goods through its tunnel. From the time the tunnel was opened to the present date, it has been used as a passageway for privately owned vehicles and for the transportation of bus passengers in busses owned and operated by the company at toll and fare rates prescribed by the Canadian railway board; no other regulatory body having asserted jurisdiction. The use of the tunnel for privately owned vehicles is held open night and day to all persons indiscriminately at the toll rate promulgated and published from time to time by the company in accordance with regulations of the Canadian railway board. The use of the busses operated by the company carrying passengers through the tunnel is also open to the public indiscriminately at prescribed and published toll rates, and the busses have been operated at regular intervals and between fixed termini at all times night and day. In the construction, maintenance, and operation of the tunnel, the company and its Canadian subsidiary are subject to the control of various regulatory authorities with respect to the safety, efficiency, and convenience of operation and the reasonableness of service charges, as follows:

(1) Approval of plans by Canadian Governor-in-Council...

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6 cases
  • Davies Warehouse Co. v. Brown
    • United States
    • U.S. Temporary Emergency Court of Appeals Court of Appeals
    • May 28, 1943
    ...52 S.Ct. 1, 76 L.Ed. 135; Publix Cleaners v. Florida Dry Cleaning and Laundry Board, D.C., 32 F.Supp. 31, 34; Parsons v. Detroit & Canada Tunnel Co., D.C., 15 F.Supp. 986, 997, affirmed City of Detroit v. Detroit & Canada Tunnel Co., 6 Cir., 92 F.2d 833; Illinois Power & Light Corp. v. City......
  • Consumers Power Co. v. Big Prairie Tp., Newaygo County
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    ...appropriate method for determining the value of Hardy Dam reflects a proper weighing of the various methods. Parsons v. Detroit & Canada Tunnel Co., 15 F.Supp. 986 (E.D.Mich., 1936); CAF Investment Co. v. State Tax Commission, 392 Mich. 442, 221 N.W.2d 588 (1974). By comparing the assessmen......
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    ...assessing officer must give reasonable consideration to any methods established by statute or common law. Parsons v. Detroit & Canada Tunnel Co., 15 F.Supp. 986 (E.D. Mich.1936). The statute itself authorizes consideration of the appraisal made by Mr. Bones pursuant to direction of this Cou......
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